Thinking about becoming a farmer? Think again.
September 20th, 2011
Utica, NE – In farm country, business is booming. Food prices remain high. Investors are funneling millions of dollars into farmland. It’s quite enticing for the would-be farmer that wants to leave the rat race … but all these factors make it exponentially harder for the next generation of farmers to get their hands dirty.
One reason it’s more difficult than ever for producers who want to get a start in the business is nervous banks aren’t lending.
Most bankers are working solely with well-established clients with just a few exceptions, said Larry Rogers, a banker in Utica, Neb.
“There’s no way that you can run out and buy a couple quarters (of land) and start farming unless you inherited a whole lot of money,” said Rogers. “It has gotten more difficult with prices they are today, even with good prices for grain; it’s more difficult for a young person to get started.”
The small town of Utica, Neb., where banker Larry Rogers works. Apart from farming, the only places of business in Utica are the grain elevator and the First Bank of Utica.
Even though the Federal Reserve is increasing the money supply and keeping interest rates low into 2013, Creighton University economist Ernie Goss said the banks simply aren’t lending the money.
“Banks will have excess reserves, and they’re earning interests,” Goss said. “That’s safe; they know they’ll get money back. They’re less comfortable lending it out, the Fed has been ineffective in generating economic activity.”
Since 1997, the number of farmers under age 35 has dropped a third, from a high of 180,000, and most blame access to credit.
“There’s so much fear out there, that you’re saying, ‘What do I buy? Do I buy gold?’ That’s one area. Another area is farmland,” Goss said. “The young farmer and even the not-so-young farmer that wants to buy or rent land for farming is competing with someone who has no interest in farming or farmland.”
Austin Bruns, 25, would love to get his hands on some farmland. Bruns, of Beaver Crossing, Neb., went to a two-year college to become a diesel mechanic and then joined the National Guard.
“When I graduated from high school I didn’t really have my sights set on anything. I knew I didn’t have any ground I was going to come home and farm,” Bruns said.
Bruns’ father got out of agriculture around 1995, unable to recover from the 1980s farm crisis. Austin Bruns now rents about 150 acres of farm ground and purchased a semi-truck. He’s keeping his options open.
“I have to stay patient, and there’s a lot of different things you can do, but if you go one route you’re shutting another one out,” he said. “You have to know what you want and plan it out, you can’t make things fall into place.”
Bruns is working with other farmers in eastern Nebraska that contract with agriculture giant Monsanto. The farmers are harvesting seed corn; which is different than field corn. The farmers band together and share equipment to cut down on costs.
What’s making it difficult for first-time farmers is that banks see them as high-risk, Goss said.
“Despite a farm boom, we’re seeing greater risk in the agriculture sector,” said Jason Henderson, chairman of the Federal Reserve Bank of Kansas City’s branch in Omaha. “A lot of it is the volatility in the markets, but we’re also seeing that come through in delinquencies in farm loans, they’re a lot lower than the housing sector, lot lower than other segments of economy, but still at highest level since the 1980s.”
A certain segment of the farm sector that has high debt and is struggling to make their payments could get worse when interest rates return to more normal levels in two to three years, Henderson said.
Matt Wildman is a University of Nebraska-Lincoln student who is graduating with a degree in agriculture economics this December. He could return to his 1,300-acre family farm in western Ohio. (We first met Matt and the Wildman family back in December.) But Wildman is interested in finding a job with an agriculture company or starting his own custom fertilizer business.
“The biggest challenge in my position (is) coming out of college with no assets to my name, no money, and trying to get a loan for $50,000 or $80,000 or more to start a business,” Wildman said. “It’s not going to happen unless you have a co-signer. My parents are willing to cosign, but it’s got to be something that will (provide) cash flow and work.”
Even when any agriculture operation works, farming isn’t as lucrative as it might seem, despite the farm boom. Veteran farmer Mark Haser is one of the farmers growing seed corn for Monsanto in eastern Nebraska.
“You have to put so much back into your operation and you have to have so much tied into it to keep it afloat; you’ll have a lot of money tied into it, but you can’t touch it,” Haser said. “If you want to die rich, become a farmer, because that’s all you’re going to do.”
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